Cryptocurrency business has become one of the profitable investment opportunities of late. Strengthened by friendly government regulations, a variety of digital assets, and constant demand from traders, it has been creating new records every day.
Broadly speaking, there are three different types of exchanges involved in executing trades. They are Centralized, Decentralized, and Hybrid exchanges. While the first two kinds of exchanges are well-known, Hybrid exchanges are playing a significant role now.
Let us get to know more about the process involved in Hybrid Cryptocurrency exchange development.
Meaning of Hybrid Cryptocurrency Exchange
A Hybrid Cryptocurrency Exchange combines the features of both Centralized and Decentralized platforms. Some disadvantages present in Centralized and Decentralized platforms are sorted out. A Hybrid exchange will have the backing of the leading fiat currencies and possesses sufficient liquidity. Some operations may be monitored by a certified authority. High transaction throughput and transparent display of prices will be ensured.
Traders will have control over their funds using a smart contract wallet system which is connected to the accurate matching engine. It includes the top-notch functionality of Centralized exchanges and possesses high-level security of Decentralized exchanges.
Crucial characteristics of Hybrid Cryptocurrency Exchange
- Adequate liquidity – By liaising with well-known third-party platforms, high liquidity is ensured to manage the rising number of orders from traders.
- Escrow management – Funds of buyers and sellers will be managed safely using an in-built Escrow system. This will increase the trust of all parties on the platform.
- Quick processing of transactions – All transactions performed by buyers and sellers are routed swiftly through a secured system.
- Atomic swap exchange facility – Powered by blockchain technology, traders are allowed to deal with digital currencies without the intervention of middlemen by using their customized private wallets.
Apart from the above features, the availability of a variety of coins and different payment gateways ensure supreme performance without investing much on creating a strong infrastructure.
Players who would be interested in a Hybrid Exchange
- Private investors – Retail investors will consider Hybrid Exchanges more suitable to manage their portfolio.
- Affiliate cryptocurrency exchanges – There are lots of third-party exchanges that support the functioning of decentralized exchanges. They would find Hybrid Exchange apt as it has adequate liquidity.
- Foreign exchange operators – Managers of a foreign exchange who operate in traditional financial markets will have a keen eye to expand their operations to cryptocurrency also.
- Institutional investors – These players handle a large amount of funds belonging to several well-off companies. They would aim at having a stake in cryptocurrency also to diversify their investments.
Advantages of a Hybrid Exchange
- Crypto pool trading – Traders can earn enormous profits through high trading volumes. By dividing the large corpus of traders into different portions, the risk will be considerably reduced. Access to the top digital coins available in the market will create a positive investment sentiment.
- Community trading – Exposure will be provided to well-known communities who are very active in the cryptocurrency space. Flexibility is given to users to create their own smart contracts for executing trades.
- Enterprise segment – As the scale of operations increase, an enterprise platform will be created for processing trades involving multiple assets.
- 24×7 service – Round-the-clock service will be provided for all entrepreneurs and professionals irrespective of their size of the investment.
- Advanced analytics – Real-time data will be provided through charts and graphs, depicting the changes in market conditions and price movements of different digital assets.
- Anonymity – Hybrid exchanges take maximum steps to protect the data and funds of users. They also comply with the various cryptocurrency regulations laid down by competent authorities.
- Protected from attacks – Chances of hacking and phishing are less as funds of users are stored in a mix of hot and cold wallets.
- Better chances of scalability – Clients that utilize hybrid cryptocurrency exchange platforms can scale faster due to the superior architecture present in the systems. This is one of the main reasons why Hybrid platforms are considered as the future for dealing in cryptocurrencies.
Limitations of Hybrid Cryptocurrency Exchanges
- Susceptible to emergencies – During a financial crisis or a technological boom, Hybrid exchanges will have complete access to the user’s funds. This can increase the chances of hacking, leading to misuse of accounts. Once the funds get into the wrong hands, it would be very tough to recover it fully.
- Not suitable for amateurs – Newbies who do not know much about the world of cryptocurrencies will find Hybrid exchanges tough to handle.
- Mismanagement of private keys – Since traders will send their private keys to the order management system for executing trades, there may be some glitches involved in decrypting it and sending it to the matching engine.
While the future is promising for Hybrid Cryptocurrency Exchange development, the software creation process is still at its nascent stage. Business firms will definitely gain from this innovative method. However, it has not been adequately tested so far. Developers need more time and better skills to streamline a great experience for their clients. Customization is the key to its success.